Hard Times And Hardship Withdrawals

CNN has a story about hardship withdrawals from 401(k) plans reaching the highest level in 10 years during the second quarter of 2010.  Fidelity Investments, which manages $844 billion in retirement funds, disclosed that, as of the second quarter, 2.2% of 401(k) participants had made hardship withdrawals over the past 12 months.

I’m not sure how many inferences you can draw from a rise in hardship withdrawals, but the increase clearly is not good news.  Anyone who takes a hardship withdrawal is not simply raiding their retirement fund and thereby decreasing their retirement security.  Hardship withdrawals also come an an enormous price — by some accounts, up to  40 percent of the amount withdrawn — because federal and state taxes are levied on the amount and a 10 percent penalty is imposed as well.  If you assume that people tend to behave rationally when it comes to their finances, then you have to conclude that anyone who would take a hardship withdrawal from their 401(k) plan must be desperate and have no other options.

One of the individuals quoted in the article linked above noted that 2.2% is a relatively small percentage and that the vast majority of 401(k) participants therefore are not taking hardship withdrawals.  That is of course true, but it also is likely true that people who have 401(k) plans with sufficient funds to be the subject of hardship withdrawals are the most prudent, careful savers.  (Although it is not clear how many people have saved for retirement, recent surveys indicate that 27 percent of Americans have saved less than $1,000 and less than half of Americans have more than $25,000 saved to fund their retirement years.  If you have less than $1,000, you probably aren’t going to take a hardship withdrawal because, even if you withdrew your entire fund, the amount left for you to use after taxes and penalties would be negligible.)

If even the most careful savers are so desperate that they need to take hardship withdrawals, rather than reducing their annual contributions or taking a loan from their saved amount, it indicates that times are tough, indeed.

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Death South Of The Border (Cont.)

The news from Mexico keeps getting more chilling.  I’ve noted in several posts — see here and here — the escalating violence in our neighbor to the south and the resulting risks for our country.  Time now has a story about the recent assassination of Edelmiro Cavazos,  the mayor of Santiago, Mexico.  The assassination of a political figure is bad enough, but what really makes the story disturbing is that the mayor’s own police officers apparently have confessed to participating in the killing.

Tales of corruption involving the Mexican security forces — where government officials shake down tourists or foreign businesses or accept bribes to look the other way when illegal transactions occur — are legendary.  There is an obvious difference, however, between petty corruption and outright participation in political murders.  If police officers and security personnel switch sides and join the drug gangs, there could be a breakdown of social order and Mexico could become much more dangerous than it already is.

America should pay more attention to Mexico.  We should offer them whatever assistance we can to help them deal with the problems of the drug gangs — and we should take the steps necessary to make sure that our border is secure and the violence cannot spill over into our country.

Obscure Bands And Great Songs: ? And The Mysterians And 96 Tears

What can you say about a band whose lead singer is identified by a punctuation symbol?  A band that was known as one of the greatest garage bands in history?  A band that recorded a song that many critics view as the first true punk rock song?

Why so many questions?  Because the band was ? And The Mysterians — a sunglasses-wearing group that hailed from Saginaw, Michigan — and the song was 96 Tears.

On October 29, 1966, 96 Tears hit number one on the Billboard charts.  What a song!  With its hypnotic, alternatively choppy and swirling organ licks, the self-pitying, then angry, then resigned lyrics, and the great bass riff when the song shifts to “and when the sun comes up,” 96 Tears cut through the copycat sounds being played on AM radio and was instantly original and definitive.

Almost 45 years later the band is still performing the song, most recently at a show in Detroit at the end of July.  The video below, which is pretty hysterical, was recorded by the band in 1998.